Decoding the surge: Analysing the meteoric rise of Nifty PSU Bank index since 2022
The Recovery
By May 2020, the index descended to the lower band of the “falling channel” on the monthly timeframe – a chart view employed by technical investors for long-term investment analysis. Many considered this juncture to be the Dawn of the Doomsday. However, contrary to expectations, the charts revealed the first rays of sunlight after an extended period of darkness. In the initial months, skepticism shrouded the prospects of recovery in the sector, resembling a pattern of three steps forward and two steps back from June 2020 onwards.
However, from November 2020 onwards, well-informed investors began to harbor the belief that the worst for the PSU Banking sector was finally behind, and the future held promise. Over the next 14 months, the Nifty PSUBANK index witnessed a remarkable rally, surging over 130%, ascending from 1260 in October 2020 to 3000 in January 2022.
Nevertheless, this substantial rally seemed diminutive when compared to the all-time high of 5376 in November 2010, which had plummeted to 1078 in May 2020 before rebounding to 3000 in January 2022. Despite the impressive rally exceeding 130%, it recouped just 45% of the “fall” from an all-time high of 5376, leaving investors perplexed about the index's future direction.
Consequently, the market remained predominantly in consolidation over the next few months before eventually trending northward. This time, market participants exuded greater confidence as bad loans were seen on a decline. The index signaled a breakout from the falling
